Nanya's record earnings fail to excite investors

Nanya Technology Corp (南亞科技), the world's No.7 maker of memory chips for computers, yesterday posted record-high earnings for last year -- but lower output and falling prices put a dent in quarterly income versus the third quarter.

Despite the booming year for the memory-chip industry on resilient demand, Nanya Technology's fourth-quarter results disappointed a packed house of investors yesterday.

"Shipment growth fell short of our expectations last quarter as we faced more hurdles to move production of more advanced 0.11-micron chips to [less advanced] 8-inch factories to save cost," company spokesman Pai Pei-lin (白培霖) said at the quarterly investor's meeting.

Shipments only increased 11 percent in the three-month period through last month from the previous quarter, lagging far behind the 30-percent growth the company had previously forecast.

During the same period, a 4 percent decline quarter-on-quarter in average selling prices also eroded profits, Pai said.

Lower average selling prices coupled with a weaker US dollar led the chipmaker's gross margin to fall to 25 percent from 38 percent in the previous quarter, he added.

Last quarter, Nanya Technology earned NT$864 million, or NT$0.24 a share, up nearly 40 percent from NT$620 million a year ago. But that result represented an almost 60 percent decline from the third quarter.

For all of last year, Nanya Technology's earnings surged to an all-time high of NT$7.04 billion, or NT$1.97 a share, reversing a loss of NT$0.44 a share in 2003. Sales for last year also expanded to NT$49.52 billion.

The quarterly result came as a shock to most industry watchers.

"The quarterly result is quite disappointing as a rough technological transition has pushed costs higher," said Frank Wang (王安亞), an executive director with Morgan Stanley & Co in Taipei.

Wang had predicted that Nanya Technology would earn NT$1.6 billion, or NT$0.43 per share in the final quarter of last year.

George Wu (吳裕良), who helps manage a US$31 million fund for Invesco Taiwan Ltd (景順投信) in Taipei, also said the result fell short of his expectations.

"As chip prices only dropped moderately in the slack fourth quarter, I believe the problem is only limited to Nanya Technology rather than being an industry-wide problem," Wu said.

Looking ahead, Pai said the situation will improve significantly in the current quarter.

"We've overcome most difficulties," Pai said.

In the first quarter, shipments will grow by 25 percent, mostly due to Inotera Memories Inc (華亞半導體), a 50-50 joint venture with Infineon Technologies AG of Germany.

Chip prices will stabilize in the first quarter in light of strong demand from computer vendors including Dell Inc and Hewlett Packard Co, after a 6 percent drop this month, he said.

"We expect chip supply to become tight next month as customers are booking more ahead of the Lunar New Year holidays," he said.

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